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SRPM PROJECT ON

HERO MOTOCORP.

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Company overview

Hero Motocorp Ltd., formerly Hero Honda, is an Indian motorcycle

and scooter manufacturer based in New Delhi, India.

Hero Honda started in 1984 as a joint venture between Hero

Cycles of India and Honda of Japan.

The company is the largest two wheeler manufacturer in India.

The 2006 Forbes 200 Most Respected companies list has Hero

Honda Motors ranked at #108.

In 2010, when Honda decided to move out of the joint venture, Hero

Group bought the shares held by Honda.

Subsequently, in August 2011 the company was renamed Hero

MotoCorp with a new corporate identity.

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Stock HistoryDate of

Approval

Date of

Issue

Particulars of Issue No. of Shares

19.01.1984 Subscription shares 150

09.08.1984 19.03.1985 Public Issue 11999985

09.08.1984 29.04.1987 Issue of Rights Shares

in the ratio of 15:50

3975000

09.08.1984 07.02.1995 Issue of Bonus Shares

in the ratio of 1:4

3993750

09.08.1984 28.09.1998 Issue of Bonus Shares

in the ratio of 1:1

19968750

09.08.1984 26.03.2001 Sub-division of Equity

Shares of Rs. 10 each

Into 5 Equity Shares of

Rs. 2 each

199687500*

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IndustryOverview

Indian two wheeler industry

saw a slight growth of 1.04%

during the April-May period of

2013 compared against the

same period of 2012.

The sales of scooter witnessed

an encouraging growth by13.88% in the April to May

period of 2013 as compared

to same period of 2012.

Demand Drivers

Economic Factors

Financing Key to industrygrowth

Demographic environment

Infrastructure

Industry factors

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RISK and return analysis

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Estimation of Beta

Beta is a measure of the volatility, or

systematic risk, of a security or a portfolio in

comparison to the market as a whole.

CompanyHero

MotoCorp

Beta Value 0.126226696

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Expected Return on

Equity

The cost of equity capital for a particular

company is the rate of return on investment

that is required by the company's ordinary

shareholders.

Re = Rf + (RmRf) * s

CompanyHero

MotoCorp

Re 9.58%

*Risk Free Rate: We assume that to be 7.97%, the rate of government

securities for the past decade.

The market risk premium has been given as 12.79% (Paper by P.Mohanty

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Cost of debt

It is the effective rate that a company pays on

its current debt.

Cost of debt = [Total interest (1- corporate tax

rate)] / Total debt

CompaniesTotal Debt

(in Cr.)

Total

Interest

(in Cr.)

Interest

Rate

Cost of

Debt (in%)

Hero 994.85 33.43 3.36 2.2178

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Weighted Average Cost of

Capital

WACC = (Debt / (Debt + Equity)) * Cost of Debt +

(Equity / (Debt + Equity)) * Cost of Equity

CompaniesCost of

Debt

Weight of

Debt

Cost of

Equity

Weight of

EquityWACC

Hero 2.2178 0.188251701 9.5844 0.811748299 8.197625

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ASSUMPTIONS

Expected growth after 5 years

According to the report on automobile industry by ratings agency

ICRA Limited, the two wheeler industry is expected to grow by 9-11

% 2017 onwards. Considering that Hero Motocorp is the market

leader, we have assumed that it will grow in sync with the market

and that its growth will remain on the higher side. Return on capital in Stable Growth

The return on capital employed for stable growth has been taken as

53% which is an average figure for the years of stable growth of the

company during the period of 2010-2012.

Return on capital in high growth The two wheeler industry was growing at a considerable rate (CAGR

of 25-26%) from the years 2008-2010. This figure has been taken as

an average of the return on capital employed at that time.

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EXPANSIONPLANS

They are creating capacities to ensure sustainable long-term growth by:

Setting up a fourth plant at Neemrana in Rajasthan with an annual

installed capacity of 750,000 units

Setting up a fifth plant at Halol in Gujarat, with an annual installed

capacity of 1.2 million in the initial phase, which will grow to 1.8

million in the next phase

Setting up a new state-of-the-art integrated R&D centre at Kukas,

Rajasthan

Consistent expansion across all three existing plants

Setting up a Global Parts Centre (GPC)at Neemrana, Rajasthan

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THANK YOU